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Major banks face competition probe

Major banks face competition probe

Thursday 06 November 2014

Major banks face competition probe

Thursday 06 November 2014


A full-blown competition investigation is to take place into the dominance the major banks have over personal and business accounts, the Competition and Markets Authority has announced.

The CMA said there has been "very little movement" in the market shares of the four largest banks, which are Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland (RBS).

The levels of customers shopping around and switching current accounts are "low" amid limited transparency in the sector, it said. Previous studies by the CMA have found that essential parts of the retail banking sector "lack effective competition and do not meet the needs of personal consumers or SMEs (small and medium-sized enterprises)".

The current account market generates revenues of more than £8 billion, while the CMA's investigation into SME banking will include more than £2 billion of business current account market and business loans. Some 65 million active personal current accounts exist in the UK, while there are more than 3.5 million business current accounts.

The big four banks collectively supply more than three-quarters (77%) of the personal current account market in the UK, and the CMA has previously found that despite moves to make it easier to switch banks, the number of people who do so remains low.

The big four also account for more than 85% of business current accounts and 90% of business loans. The CMA has said that SME switching levels remain low, with just 4% changing their bank every year.

The CMA said it is concerned about continuing barriers of entry and expansion in the sector, which limit the ability of smaller and newer providers to develop their businesses. The investigation will be conducted by a market reference group, drawn from the CMA's panel of independent members.

The group will be appointed shortly and will publish a timetable for the investigation. Investigations of this kind can take up to 18 months.

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